Correlation Between BRP and Modine Manufacturing
Can any of the company-specific risk be diversified away by investing in both BRP and Modine Manufacturing at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BRP and Modine Manufacturing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRP Inc and Modine Manufacturing, you can compare the effects of market volatilities on BRP and Modine Manufacturing and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BRP with a short position of Modine Manufacturing. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRP and Modine Manufacturing.
Diversification Opportunities for BRP and Modine Manufacturing
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between BRP and Modine is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing and BRP is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BRP Inc are associated (or correlated) with Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of BRP i.e., BRP and Modine Manufacturing go up and down completely randomly.
Pair Corralation between BRP and Modine Manufacturing
Given the investment horizon of 90 days BRP Inc is expected to generate 0.33 times more return on investment than Modine Manufacturing. However, BRP Inc is 2.99 times less risky than Modine Manufacturing. It trades about -0.2 of its potential returns per unit of risk. Modine Manufacturing is currently generating about -0.11 per unit of risk. If you would invest 5,249 in BRP Inc on November 7, 2024 and sell it today you would lose (468.00) from holding BRP Inc or give up 8.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRP Inc vs. Modine Manufacturing
Performance |
| Timeline |
| BRP Inc |
| Modine Manufacturing |
BRP and Modine Manufacturing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRP and Modine Manufacturing
The main advantage of trading using opposite BRP and Modine Manufacturing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP position performs unexpectedly, Modine Manufacturing can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Modine Manufacturing will offset losses from the drop in Modine Manufacturing's long position.The idea behind BRP Inc and Modine Manufacturing pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Modine Manufacturing vs. Cooper Stnd | Modine Manufacturing vs. Motorcar Parts of | Modine Manufacturing vs. American Axle Manufacturing | Modine Manufacturing vs. Stoneridge |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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